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To cite this document: Herman Diller, (2008),"Price fairness", Journal of Product & Brand Management, Vol. 17 Iss: 5 pp. 353 - 355
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Price fairness
Herman Diller
Universitat Erlangen-Nurnberg, Nurnberg, Germany
Abstract
Purpose The purpose of this article is to integrate the various strands of fair price research into a concise conceptual model.
Design/methodology/approach The proposed price fairness model is based on a review of the fair pricing literature, incorporating research
reported in not only English but also German.
Findings The proposed fair price model depicts seven components of a fair price: distributive fairness, consistent behaviour, personal respect and
regard for the partner, fair dealing, price honesty, price reliability, and influence/right of co-determination.
Practical implications Since buyers purchase decisions are influenced by their subjective perception of price fairness, sellers need to understand
what constitutes a fair price.
Originality/value This model provides a concise representation of the multi-dimensional concept of price fairness. It identifies aspects of a fair price
which have hitherto received little research; for example, the need for personal respect for the partner and the right of co-determination.
Keywords Prices, Research
Paper type Research paper
increase, for example, the seller can pass the price increases
on if his/her profit margin remains the same (profit
protection). The exploitation of exogenously caused
conditions (price increases for snow removal following a
blizzard for example) is looked upon as unfair, even if it is in
conformity with the market. In such instances, the market
price mechanism is likely to be distrusted. That is not to say
that it is considered unfair, but rather as less fair than a cost
plus calculation. This type of cost-oriented price ethics is
widespread (cf. Wied-Nebbeling, 1985, p. 44ff). A price
change is considered more unfair if the seller is suspected of
bad, i.e. selfish motives than if good motives (job
retention, for example) are attributed to him (Campbell,
1999). If windfall profits (increases in market price against
a steady cost situation, for example) should accrue to a seller,
it is certainly not considered unfair to rake them in. Of course,
this does not hold true for progressive price increases on the
part of a seller. Moreover, genuine (out of pocket) losses on
the side of the purchaser (losses in the sense of the prospect
theory), or price increases for example, are perceived as a
more serious vitiation of price fairness than an equally large
revocation of opportunistic profits (the elimination of a bonus
program, for example).
The concept of just procedure (procedural fairness) looks at
the process underlying and leading to the eventual returns.
Fair dealings are consistent, unprejudiced and non-partisan;
they represent the interests of all partners, and are based upon
accurate and careful information as well as upon ethical
standards (cf. Leventhal et al., 1980, p. 223f). In cases of
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1061-0421.htm
This model and text were published first in Diller, H.J. (2000), Preispolitik,
Kohlhammer et al., Stuttgart, pp. 183-8 (4th edition 2007). Reprinted
with permission of the author from Preispolitik, by Hermann Diller.
Translated by Susan Hecker Ray, Professor of German, Fordham
University.
353
Price fairness
Herman Diller
Distributive fairness
This refers to the fact that the price and the service/product
stand in a standard market-acceptable relation to one another.
Should one partner deliberately try to improve his/her
position unilaterally, such an act is considered unfair.
The possibility of exerting an influence and the right of codetermination in the shaping of the business relation promote
acceptance, especially in asymmetrical relations. In this vein
Leventhal (1976, p. 139) states that people are more inclined
Consistency
Consistency implies that the interaction procedures between
the partners always follow the same conformities to rule; in
other words, for example, that they all act in keeping with the
same pricing formulas. It is assumed that the business
partners will observe and hold to specific, written or
unwritten standards and rules. If one partner wants to
change these rules, he/she must announce his/her intention
and the details of it to the other partner openly and
persuasively beforehand.
Price reliability
This concerns the observance of the prices that were
established at the time the contract was signed. It can
become a problem, however, especially when unforeseen
service conditions turn up during the performance of the
same when, for example, initially hidden inventory
deficiencies delay automobile repairs. The seller assumes
these risks by establishing flat rates, which is why such lump
prices are considered especially fair, even though such cases as
the one described above have conceivably been incorporated
into those prices in advance.
Pricing honesty
Pricing honesty is one aspect that is tuned particularly to the
truth and clarity of the pricing information (cf. Diller,
1997b). The customer expects accurate, easily
comprehensible, unadulterated and complete information
concerning prices, conditions and services. He/she relies upon
the fact that his/her business partner will not try to take
advantage of him/her, even if, for some reason, he/she is not
careful enough and fails, for example, to study in detail all the
small print in the contract(s).
354
Price fairness
Herman Diller
References
Campbell, M.C. (1999), Perceptions of price unfairness:
antecedents and consequences, Journal of Marketing
Research, Vol. 36 No. 2, pp. 187-99.
Deutsch, M. (1975), Equity, equality and need, Journal of
Social Issues, Vol. 31 No. 3, pp. 137-50.
Diller, H. (1997b), Preisehrlichkeit Eine neue Zielgroe im
Preismanagement des Einzelhandlers, Thexis, Vol. 14
No. 2, pp. 16-21.
Kahneman, D., Knetsch, J.L. and Thaler, R.H. (1986),
Fairness and the assumptions of economics, Journal of
Business, Vol. 59 No. 4, pp. 285-300.
Kalapurakal, R., Dickson, P.R. and Urbany, J.E. (1991),
Perceived price fairness and dual entitlement, Advances in
Consumer Research, Vol. 18 No. 1, pp. 788-93.
Kaufmann, P.J. and Stern, L.W. (1988), Relational exchange
norms, perceptions of unfairness, and retained hostility in
commercial litigation, Journal of Conflict Resolution, Vol. 32,
September, pp. 534-52.
Leventhal, G. (1976), Fairness in social relationships, in
Thibaut, J. and Carson, R. (Eds), Contemporary Topics in
Social Psychology, General Learning Press, Morristown, NJ,
pp. 211-39.
Leventhal, G.S., Karuza, J. and Fry, W.R. (1980), Beyond
Fairness: A Theory of Allocation Preferences, Springer-Verlag,
New York, NY.
Maxwell, S. (1995), What makes a price increase seem
fair?, Pricing Strategy and Practice, Vol. 3 No. 4, pp. 21-7.
Mikula, G. (1980), Gerechtigkeit und soziale Interaktion,
Huber, Bern.
Schwinger, T. (1980), Gerechte Gu terverteilungen.
Entscheidungen zwischen drei Prinzipien, in Mikula, G.
(Ed.), Gerechtigkeit und soziale Interaktion, Huber, Bern,
pp. 107-39.
Thaler, R. (1985), Mental accounting and consumer
choice, Marketing Science, Vol. 4 No. 3, pp. 199-214.
Wied-Nebbeling, S. (1985), Das Preisverhalten in der Industrie,
Mohr Siebeck Verlag, Tubingen.
Fair dealing
The concept of fair dealing stipulates generosity in the case of
doubt and flexibility in the face of unforeseen circumstances.
Generosity is revealed in a readiness to meet the partner
halfway and in the renunciation of a petty interpretation of
contracts or agreements. Even when it is not legally
demanded, the fair business partner, for example,
guarantees cost free repairs or replacements in situations
involving relatively small shortages or deficiencies. Flexibility
in the interpretation of the business relation, for example, can
lead to an increased sense of fairness, if one contractual
partner does not stubbornly cling to perhaps even longstanding predetermined rules, for example, but rather
355